Michigan Earns Top 529 Plan Rating
Back to school season is already here. Home-room bells will soon be tolling for the youngsters. There will be added apprehension this year with the Delta Variant making its way across America—while we encourage everyone to be safe, that’s not our primary message this week. We actually have some good news to share (and nag you about!).
Morningstar honored Michigan’s 529 College Savings Plan (the MI Education Savings Program) with a Gold Star Rating.[i] The 2020 upgrade meant it joins 529s from Illinois and Utah as being the top three plans in the country. The rating system is based on the quality of the investment choices and a plan’s management process.
Morningstar Gold-Rated 529 Plans (2020)
So as your kids head off to their first day in school over the coming weeks, take a moment to consider their future and your financial plan. If you have your retirement contributions in good order and an adequate emergency fund, then you should consider investing in your children’s future by way of a 529 plan.
Americans Are Wealthier Than Ever
What makes today’s environment unique is that many Americans have ample savings following the pandemic. An infamous report from the US Federal Reserve revealed that most Americans couldn’t come up with $400 to pay for an emergency expense[ii], so saving for retirement (let alone college) was a tough ask. People didn’t even have an emergency fund.
Fast-forward to today, and the data show a different story. People have plenty of savings care of massive stimulus and aid programs during the pandemic. Who knows—more could be on the way if conditions deteriorate once more. Let’s hope that doesn’t happen. According to May’s Personal Savings report, Americans saved more than $3 trillion in the last year. Compare that to the $1 trillion on average of the prior ten years.
US Personal Saving (12-month sum)[iii]
Make Your Money Count
Stimulus checks help. So too does a strong stock market, rising private business valuations, and a lava hot real estate market. These factors contribute to increasing wealth across the nation. Prudent families can put some of that newly found (and earned) money to work for the future by way of Michigan’s fantastic 529 College Savings Plan.
Benefits of a 529
A student can use a 529 to help pay for tuition, some room and board costs, supplies like computers, and costly textbooks. Moreover, when the parent is the account owner, there is minimal impact on the child’s financial aid eligibility. Here’s a kicker—you can get grandparents to chip in, too! Other members of the family can contribute to the 529. One final benefit to the Michigan ESP is that if the child does not go to college, you can change the beneficiary to another child in your family penalty-free.
The Point
The fall semester is just around the corner. It’s a good time to think about your children’s future and how you will afford the rising cost of college. Perhaps you have more cash in your checking account these days or simply have assets that have appreciated over the last year. We are here to help you carve out the right college savings plan.
As a reminder, check out our new CFO and tax services for business owners.
We’ll talk soon!
[i] https://www.morningstar.com/articles/1006084/the-top-529-college-savings-plans-of-2020
[ii] https://www.minneapolisfed.org/article/2021/what-a-400-dollar-emergency-expense-tells-us-about-the-economy
[iii] https://www.yardeni.com/pub/personalsave.pdf